Spotlight Series

Fair Finance Funds

The Fair Finance Fund (“Fund”) is a non-profit social finance fund dedicated to providing loans and mentorship services to local food and farm enterprises that value strong local food systems, local economies, and a healthy planet. The Fair Finance Fund builds on seed capital to implement an ongoing investment opportunity for community-minded investors, that is, individuals who want to invest their capital to build local food systems in Ontario to support food that is grown, raised and processed in their own backyards. The Fair Finance Fund provides support across Ontario’s food webs, from production to waste redirection.

Interview with Sally Miller, Project Manager, Local Food Farm Co-ops/Fair Finance Fund

By Sadaf Kazi, Social Enterprise Development, NORDIK Institute

What inspired you to lead Fair Finance Fund? 

When we started this, I was the project manager for the Local Food Farm Co-ops, which is a provincial network for food and farm co-operatives across Ontario. Every year we do consultations with members and every year one of the major themes is to help them get access to capital. I led the development of a discussion paper that we later circulated to all of our members and partners. We received enthusiastic feedback resulting in a number of meetings in 2017-18.

A lot of established farmers are retiring or leaving the profession. The new generation that is replacing them is not necessarily coming from traditional backgrounds. This means that they face barriers to capital, which is why we need something that is directed towards innovation and new models of food and farming. To address this issue we applied for and received a grant to start the Fair Finance Fund, which is separately incorporated as a Nonprofit. The Fund raises money from non-repayable capital through grants as well as community bonds. It offers community bonds to investors who want to invest in their beliefs and save with interest rates ranging from  2% to 4%. The Fair Finance Fund does not lend to people who are very high risk because they already have lots of debt. We do due diligence when we are lending, but our model is different than that of a bank. Typically, for a bank loan, they would ask you who the owner is, but in the case of a co-op there could be thousands of owners and they’re not all going to sign the application.

What is the motivation behind your social enterprise? 

To ensure that successful entrepreneurs in the local food and farm sector can access the financing they need to thrive. With the food system going through rapid changes and transformation and responding to climate challenges we are funding the social enterprises that are the change that we need to see.

Who do you hope to impact or reach through the work of your social enterprise and why? 

We accept applications from all local food and from social enterprises that can show that they have a social purpose. That is one of the things we ask on the preliminary application.

Do you only invest in the food or agriculture sector and not in other social sectors?

Right. From field to fork and waste.

Would you consider yourself a social entrepreneur? Why or why not? 

We do consider our organization a social enterprise, and therefore, I consider myself a social entrepreneur. Social finance is fairly new and very innovative because as far as I know, there is no similar fund that focuses on the local food and farm sector of Ontario. There are some that cover other geographic areas or sectors, but the innovations that we are using like community bonds make me think that we are driven by a social purpose and mandate, which makes us a social enterprise.

Does the term social entrepreneur or resonate with you and what words or phrases do you connect with more? 

We don’t use the term, but as I said before, we consider ourselves a social enterprise and as a manager of the social enterprise, I think of myself as a social entrepreneur along with the team that developed this.Then, of course, the people we’re lending to are social entrepreneurs. We utilize a two-stage process so people do not have to go through a whole full application without being told whether or not they even fit. We do a preliminary application that mostly looks at what they’re going to need and equity financing and things like that. It also gives them a chance to talk about their social and environmental benefits. The requirement of being a social purpose business is right up front and they have to be able to talk about that.

What barriers or challenges have you encountered? 

 I think the main barrier in our field is that social finance is new and still fairly innovative. Many investors are interested in being able to move their money into something that they believe in or something they value, but there is not a lot of information or experience in how that would work. A number of family foundations are exploring it. Some of them have moved to have a social finance policy and they are investing, but some are just exploring it and have yet to figure out how this fits with the regulations of a charitable foundation When it comes to the latter folks, we end up having several meetings and training them on social finance and then narrowing it down.

What resources do you need and what does your project need as you move forward? 

Overall I think we need the social enterprise ecosystem and the social finance ecosystem to be developed, not just by single funds like the Fair Finance Fund. It should be something broadly developed nationally by the federal government. I think the government has announced a significant investment in social finance and social enterprises, and there is money already flowing. I would hope that Canada would see this as an important economic development tool.

Who is your community of support? 

 I was puzzled about this question a little bit. I think our supporters are the individual and institutional investors. We also have volunteers on the loan review committees and our board of directors. We have a lot of tremendous in-kind support. I also want to include people who are already doing social finance for example the Community Futures Development Corporations, and NORDIK Institute’s work in supporting the ecosystem. People were so generous with their time, offering templates and also offering to partner with us in cases.

How important is local face-to-face community support? 

 We have found it’s hugely important. Even though we’re a provincial organization and we do webinars for investors and meet loan clients virtually, we have been really adamant about doing in-person site visits as much as possible, getting to know the clients and following up with them later to see how it’s going. With the investments, we find that after an initial phone call or two, it tends to be face-to-face meetings. When we’re working with a foundation or an institution, then we’re presenting to the board or to the finance committee or something like that.

What would have made this process easier for you? 

I think the federal government has committed funding and resources to build a strong social finance sector. It is exactly what we need.

What do you hope to see or social enterprise become in the future? 

Our goal is to reach at least $ 2.4 million in assets under management, which would give us enough of a flow of interest for us to operate The Fair Finance Fund sustainably long term.

We also found out from a survey that there is a significant need for small grants that would help organizations reach the point of being able to apply for a loan. That is another area we are working on.

What other community initiatives are you involved in? 

We are embedded in social finance. Our board of directors have been well connected to the farming and the local food sector. A lot of work in social finance and impact investing is word of mouth and through networks. What we tried to do was to build an organization that has really strong networks. I have been working in this sector for about 25 years, so I also bring all kinds of different connections across the food system. And others bring their networks and teams as well. Making sure that people have strong networks is an important part of the plan.

Are you aware of other youth, social entrepreneurs or those with innovative ideas that need support and resources? 

A lot of our applicants fit into that category. I would also like to mention the network of community or economic developers like Community Futures Development Corporations (CFDCs) is where I look for resources, support and ideas.